Is the United States Canada's Socialist Neighbor to the South?

October 15, 2013

Americans have long dismissed Canadians as "our socialist neighbors to the north." But since 2005 Canada has been more economically free than the supposed laissez-faire wonderland of the United States -- and the gap is widening, says Jared Meyer, a research associate at the Manhattan Institute.

The news comes from the Economic Freedom of the World Index, co-published by the Cato Institute, the Canadian Fraser Institute and more than 70 other think tanks from around the world. The 2013 Annual Report was published in September and ranked countries based on data from 2011. Economic freedom is defined by the Fraser Institute as "the extent to which you can pursue economic activity without interference from government, as long as your actions don't violate the identical rights of others."

From 1980 until 2000 the United States was generally rated the third freest country behind only Hong Kong and Singapore.

Now it is number 17.

It is not only developed countries, such as New Zealand (number 3), Switzerland (number 4) and Finland (number 7), overtaking the United States -- developing countries are catching up.

America's ranking fell 10.5 percent from 2000 to 2011.

Over that same period the world's economic freedom rose by 2 percent.

This is not a good sign for the future of America in an age of global competition.

It is difficult to see the United States making a comeback anytime in the near future. The Affordable Care Act and Dodd-Frank are both filled with more regulations (almost 25,000 pages worth combined) that will only increase costs of doing business and regulatory uncertainty.

These rankings matter. The amount of economic freedom in a country has a direct impact on its residents' lives. Whether people are trying to find jobs, finance homes, start businesses or save for retirement, they are deeply affected by the level of government interference with the economy.

It is a long way down for the United States to reach the levels of countries like Russia (number 101), Iran (number 127) or Venezuela (number 152). But if America keeps falling over 15 places a decade, it could happen. At least the United States has a role model to look up to -- its capitalist neighbor to the north.